However, what is patently evident is that the government remains committed to implementing the mandatory use of CNIC for all transactions over 50,000 rupees, with the objective of widening the tax net - a measure fully supported by BR. In this context, it is relevant to note that the government has postponed the implementation of the mandatory use of CNIC twice already due to organised countrywide resistance by traders. With the new deadline for implementation on February 1, 2020 looming on the horizon, the Prime Minister has scheduled a meeting with traders on January 20 perhaps to tell them that agitation this time around would not be entertained. There is, however, evidence to suggest that traders may opt to follow the path of resistance yet again and one can only hope that the government is prepared to deal with the aftermath once and for all.
At the same time that revenue shortfall is being envisaged, the expenditure demands of the government are rising - both by its own members of parliament as well as from its coalition partners. These are not likely to be met, even though they are legitimate demands, because of the lack of resources. The government during the first three months of the current year released (i) less than one percent budgeted for social sector development (and this is in spite of the health cards and envisaged increases in Benazir Income Support Programme announced by the Prime Minister) with reports indicating that releases remained appallingly low under this head till December 2019; and (ii) less than 9 percent for Public Sector Development Programme.
The budget deficit for the year in the initial agreement with the IMF was 7.2 percent for the current year (based on 7.2 percent projected inaccurately for 2018-19; however, with deficit estimated at 8.9 percent for last year, the IMF's first review report notes a programme agreement of 7.3 percent deficit for the current year with a projected deficit of 7.6 percent by year-end). The Fund has given the primary deficit (difference between fiscal deficit and interest payments) at 3.5 percent for last year though at the time of negotiations it was given at 2.4 percent; however, it has not deviated from its earlier programme condition of 0.6 percent primary deficit for the year which may well account for the decision by Dr Hafeez Sheikh to slash disbursements for social sector development and PSDP.
It is a virtual certainty that the current year is going to be tougher than last year for the simple reason that the IMF is unlikely to adjust its primary deficit target resulting in low growth, low productivity, rising unemployment and inflation due to an undervalued rupee (by 5 percent in October as per SBP website) and a prohibitively high discount rate of 13.25 percent.